The Rajasthan High Court at Jodhpur has set aside the conviction of an individual under Section 138 of the Negotiable Instruments Act, 1881, after the parties entered into a compromise. In an order dated October 6, 2025, Justice Sandeep Shah allowed a criminal revision petition, quashing the concurrent findings of the lower courts, but conditioned the acquittal on the petitioner depositing 7.5% of the cheque amount as costs with the Rajasthan State Legal Services Authority.
Background of the Case
The petitioner, Lalu Ram Dangi, had challenged a judgment dated November 29, 2022, from the Special Judicial Magistrate No.4 (NI Cases), Udaipur. The trial court had convicted Mr. Dangi in Criminal Case No. 4882/2014 for an offence under Section 138 of the NI Act and sentenced him to one year of simple imprisonment along with a fine of Rs. 3,40,000.
Subsequently, Mr. Dangi filed a criminal appeal (No. 136/2022) before the Special Judge, Sessions Court, Udaipur. The appellate court dismissed the appeal on August 19, 2023, upholding the trial court’s decision. Aggrieved by these judgments, Mr. Dangi filed the present criminal revision petition before the High Court.
Arguments of the Parties
Mr. Vishwas Khatri, counsel for the petitioner, submitted that the parties had amicably settled the dispute. He presented a settlement deed dated October 6, 2024, signed by both parties in the presence of witnesses, which confirmed that the complainant, Madan Lal Singhvi, had received the entire outstanding amount. Citing Section 147 of the Negotiable Instruments Act, which makes offences under the Act compoundable, he prayed for the revision petition to be allowed on the basis of the compromise.
Mr. Love Jain, appearing for the complainant Mr. Singhvi, confirmed the settlement and the receipt of the payment. He stated that in light of the compromise, he had no objection to the allowance of the revision petition.
Court’s Analysis and Decision
Justice Sandeep Shah, considering the submissions and the spirit of Section 147 of the NI Act, proceeded to analyze the legal position on compounding such offences. The Court referred to several landmark judgments of the Supreme Court to guide its decision.
The judgment cited Damodar S. Prabhu vs. Sayed Babalal H (2010), which established guidelines for a “graded scheme of imposing costs on parties who unduly delay compounding of the offence.” It also referenced M/s. Meters and Instruments Private Limited and Anr. vs. Kanchan Mehta (2018), wherein the Apex Court observed, “Offence under Section 138 of the Act is primarily a civil wrong… The object of the provision being primarily compensatory, punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation…”
Further, the Court took note of the recent Supreme Court decision in Sanjabij Tari v. Kishore S. Borcar & Anr. (2025), which revisited and modified the guidelines for compounding. The Apex Court stated it was time to “‘revisit and tweak the guidelines'” due to changes in interest rates and the high number of pending cases. Under the modified guidelines, compounding before a High Court in a revision or appeal requires the accused to pay 7.5% of the cheque amount as costs.
Applying these principles, Justice Shah allowed the revision petition based on the compromise. However, the court observed, “since the compromise has been arrived at after rejection of the appeal preferred by the petitioner, a cost of 7.5% of the cheque amount deserves to be imposed upon the petitioner in light of the decision rendered by the Hon’ble Apex Court in the case of Sanjabij Tari (supra).”
Accordingly, the High Court quashed and set aside the conviction and sentence passed by the Special Judicial Magistrate and upheld by the Sessions Judge. The acquittal was made subject to the petitioner depositing the cost of 7.5% of the cheque amount with the Rajasthan State Legal Services Authority in Jodhpur within one month. The court directed that if the cost is not deposited within the stipulated time, the revision petition would be listed again for appropriate orders.
